The New World of Digital Payments
by Joe Mullich, Contributing Writer
When it comes to payments, especially in the business-to-business (B2B) space, cash is no longer king. In fact, since the onset of the COVID-19 pandemic, 57% of small and midsize enterprises (SMEs) are increasingly opting for digital services for their B2B payments, according to a MasterCard survey. Whether it’s due to consumers demonstrating a drastic reduction in traveling to buy products in person, a hesitation to handle physical currency, or a complete acceptance and assimilation into the world of e-commerce, electronic payments seem to be gaining in popularity with no signs of slowing down. To survive and prosper in this new digital world, companies need to adapt.
“Digital payments aren’t a luxury, but a necessity to stay relevant,” says Greg Castro, Senior Vice President of EVO Payments, North America, and General Manager of EVO’s SAP division, Delego. “If you are unable to provide that service for customers, you might not lose them today, but as the technology advances, not having the right digital payment system might be a deal-breaker tomorrow.”
COVID-19 is a big reason behind the boom in digital payments, but it’s hardly the only one. The growth of digital payments is part of a broader movement to refocus digital efforts to meet changing customer expectations and competitive pressures. The companies that gain the most success see digital payments as a pathway to streamline the payment collection process, reduce costs, and gain greater visibility into overall cash flow.
— Greg Castro, Senior Vice President of EVO Payments, North America, and General Manager of EVO’s SAP division, Delego
A Check on Checks
Traditionally, many B2B companies have been tied to legacy processes and policies, causing them to lag behind the consumer landscape in adopting digital payments. Over the past few years, they have come under increasing pressure from their buyers, who are looking for cost savings and efficiencies they can pass on to their ever-demanding customers. As a result, B2B companies have been embracing digital payments, now more than ever before, to bring efficiency to their accounts receivables and speed up the order-to-cash process. COVID-19 has dramatically accelerated that trend with the pandemic speeding the adoption of B2B digital payments by three years, according to a Bain & Company, Inc., infographic.
Two-thirds of SMEs are now actively dissuading customers from using checks and cash, according to the MasterCard survey. This stems partly from health concerns since government regulators and agencies have advised against using physical currency whenever possible to hinder the spread of the virus. Digital payments also became more of a practical necessity when most employees began working from home because managing manual payment processes became a herculean task. The simple act of depositing a paper check became a logistical challenge.
Companies have come to realize that payments are not a commodity service but a critical business infrastructure. In addition, they are developing a better understanding of what a true digital payment experience looks like. “If, as a customer, you have to call a company and have an employee take down your payment information, you aren’t receiving the true benefits of digital payments,” Castro says.
Speeding the Order-to-Cash Process
Accepting forms of digital payments is just the tip of the iceberg. Companies that have taken their receivables process further with automation and integration have seen the biggest payoff. Allowing customers to manage their own accounts online has proven to both reduce manual labor on the business side as well as increase the customers’ overall experience. The benefits increase manyfold when a company’s payment acceptance process is integrated with its ERP solution.
An SAP software partner since 2000, Delego Software ULC, a division of EVO, offers a variety of payment solutions that are SAP-certified and can help companies improve their payment acceptance process through automating repetitive tasks and integrating payments directly into their ERP system.
“You need to look at the business holistically,” Castro says. “Imagine that your team members are currently spending most of their time handling payments, depositing paper checks, and managing reconciliation. If you can automate some of those tasks, you can reallocate your team’s valuable time to work that helps grow the business.”
With the right technology in place, companies can reduce their order-to-cash process from weeks to days, or even hours. With many companies suffering from revenue drops during the pandemic, this can be a vital step in relieving cash-flow pressures.
Develop a Payments Strategy
COVID-19 has changed behaviors in ways that no one could have fathomed only a few months ago. Moving forward, digital adoption and new payment methods will only proliferate. Customers, in both the consumer and B2B space, have gotten a taste of digital payments and frictionless buying experiences, and companies should align their digital payment offerings and strategies to meet the expectations of today’s buyers.
However, when it comes to developing a digital payments strategy, it is not a one-size-fits-all answer. Moreover, implementing a fully comprehensive approach would likely prove to be expensive and overall ineffective for most companies. The key is to find a digital payments strategy that fits the needs of the individual business. “Companies should start by identifying the top pain points of their collection process, be it paper checks, reconciliation, manual labor, etc.” says Castro. “Then, they can tackle those specific challenges using the payment technology that is offered today.”
He says that it can be easy to get caught up in the latest and greatest trends, but companies should focus on what will provide the most benefit to both their business and their customers. For more information on digital payments for SAP customers, visit www.delegopayments.com.